Exiting bank KBC has admitted it overcharged mortgage customers who switched to another lender because of disconnection fees. It has now paid the affected customers compensation.
The incorrect calculation of disruption fees may have deterred hundreds of people from switching from the bank selling their mortgages to Bank of Ireland.
It is understood a number of KBC mortgageholders were keen to select their own lender before their home loans are sold to Bank of Ireland.
KBC Bank Ireland admitted it miscalculated the disruption fee for some of its customers looking to get out of a fixed rate and switch to another lender.
Consumer advocate Brendan Burgess said: “A lot of people who wanted to switch from KBC got the wrong break fee and then chose not to switch, so they’ve lost a lot as prices have gone up since then.”
KBC Bank said 166 mortgage accounts where people broke out of a fixed rate and switched were affected by the bug.
However, Mr Burgess said: “The big problem is how many people have received incorrect offers and as a result have chosen not to switch when rates were much lower.”
KBC said in a statement: “Following an internal review, KBC Bank Ireland determined that some break-funding fee calculations for a particular KBC scheme were incorrect.”
The automatically generated calculations resulted in an overpayment or, in some cases, an underpayment of the so-called break-funding fees.
It added that 166 mortgage accounts were affected, of which 106 were overcharged and 60 were undercharged.
“Where an underpayment has occurred, KBC Bank Ireland does not require it to be repaid by the customer and no further action is required,” the bank said.
It said it has contacted and apologized to all affected customers about the error, and refunds will be issued where necessary. The total reimbursements paid back are €28,210.
“Processes have been put in place to ensure this error does not recur. KBC reported the error to the central bank in July 2022,” the bank said.
Earlier this year, Mr Burgess advised KBC mortgageholders to consider switching to another lender before their mortgages are purchased by Bank of Ireland.
Mr Burgess’ advice comes after the competition watchdog cleared the sale of €8.8 billion of mortgages from KBC Bank to the Bank of Ireland in May. The transfer is not expected to be completed until the first quarter of next year.
Mr Burgess said the Bank of Ireland’s “very high interest rates for existing customers” and its practice of charging them more than new customers will result in a huge increase in mortgage repayments for KBC customers when the mortgages are granted.
Bank of Ireland takes over non-performing loans, including mortgages, from KBC, as well as their deposits and a small number of non-performing loans.
One of the conditions imposed by the competition regulator is that KBC mortgage customers are entitled to the same fixed interest rate as they received from KBC for the remainder of their mortgage term.
Customers benefiting from a 0.2% discount for holding a current account with KBC can transfer this to Bank of Ireland without having to have a Bank of Ireland current account.
Bank of Ireland has also committed to offering KBC customers equivalent variable and fixed rate options on their first post-migration rollover.
Mr Burgess said his submission to the Competition and Consumer Protection Commission had been “completely ignored”.
The filing had called for a condition attached to the takeover that Bank of Ireland must treat the KBC mortgages as a separate entity.
https://www.independent.ie/business/personal-finance/property-mortgages/kbc-bank-ireland-overcharged-homeowners-who-switched-their-mortgages-42153786.html KBC Bank Ireland overcharged homeowners who switched their mortgages